Liaquat Ahamed’s Pulitzer Prize-winning Lords of Finance explained the roles of key central bankers and the gold standard in causing the Great Depression. In his new book, 1873, he takes readers to the late nineteenth century, when the bankers of Britain, France, Germany, and the United States were in charge, bankrolling each other’s projects and rolling the dice on Turkish, Egyptian, and other developing countries’ debts. Once again, gold plays a leading role, this time as silver is on its way out.
While Ahamed explains the details quite well as he goes along, it helps to start with a general understanding of why finance mattered. In the late nineteenth century, most advanced economies were industrializing, but lacked the infrastructure to bring goods to market. To build the needed railroads and canals, businessmen (or governments) raised funds in the credit markets, so the actual cost of borrowing money was important. The cost of borrowing was a function of a project’s riskiness and the actual availability of money, limited initially by available stocks of gold and silver, then by gold alone. The thru-line of Ahamed’s account is that in a period with few new gold discoveries, dropping silver as a backing for money produced decades of disastrous deflation in these major western economies.
Ahamed understands the role of humor and anecdote, peppering his account with the leading characters’ nicknames and foibles. We’re introduced to “Evelyn Over-Baring” (Britain’s Major Baring) and “Abdul the Damned” (Abdülhamid II) and “The Ohio Icicle” (US Senator Sherman). We learn that Ismail Pasha’s left-behind harem women rioted in 1879 and caused $40,000 in damages. While these stories keep us engaged, it’s the moments when we see that history has repeated itself that are really compelling. Ahamed shares the story of US Secretary of State Blaine threatening Canada with the outrageously high 1890 tariffs if Canada didn’t agree to being annexed as our forty-fifth state. (Then, as now, Canada passed and made better deals elsewhere.) And while the late-nineteenth-century struggle over bimetallism may seem arcane — we’ve all abandoned the gold standard as well as silver, long ago — the advent of cryptocurrencies (which Ahamed might be saving for a next volume?) is currently causing much rethinking of monetary strategies.
One of the biggest areas where Ahamed’s history repeats itself is less arcane: antisemitism. While the Rothschilds’ banks were substantial players in this period, they were deliberately conservative in their loans and largely hidden from public view. But time and again, when markets crashed, when economies collapsed, there were always people making their fame or fortune by accusing the Jews.
Ahamed’s 1873 might be a bit of work for the lay reader, but returns on the time invested are solid — even if you just remember that Abdülhamid II not only kept a food-taster, but also had a cigarette-taster for that first puff!
Bettina Berch, author of the recent biography, From Hester Street to Hollywood: The Life and Work of Anzia Yezierska, teaches part-time at the Borough of Manhattan Community College.
